Business: Jyoti CNC has a market share of 10% in India and 0.4% in the global market in manufacturing CNC machines. CNC or computer numerical control machines make parts widely used in automotive, defence, aerospace and engineering.
Financials: Revenue grew by 26% annually to ₹929 crore between FY21 and FY23 while operating profit (Ebitda) rose 75% to ₹97.3 crore with an Ebidta margin of 10.48%.
It had a net profit of ₹15 crore in FY23, while it incurred a net loss of ₹48 crore and ₹70 crore in FY22 and FY21, respectively. In the first half of FY24, it had revenue of ₹509 crore with an operating margin of 14.59% and profit of ₹3.3 crore. The company has borrowings of ₹821 crore with a net worth of ₹205 crore at the end of September 2023. Interest expenses at ₹49 crore in the first of FY24 imply an effective interest rate of 11.9%.
Risks: The company has a debt service ratio – a measure of how much operating income it generates to fulfil its annual debt obligation – of 0.88 at the end of FY23. A reading below one shows the borrower may be unable to pay current debt obligation without recourse to outside sources. The company has rescheduled payments of its credit facilities from its lenders. Valuation: At the higher end of the price band, the company is demanding a price-earnings multiple of 501 times FY23 earnings. Macpower CNC Machines, another Rajkot-based company, with a turnover of ₹200 crore in FY23 is trading at 48.71 times on the NSE.